Heard at Edmonton, Alberta, on April 17, 2002.
Judgment delivered at Ottawa, Ontario, on May 21, 2002.
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
CONCURRED IN BY: STRAYER J.A.
NADON J.A.
Appellant
and
ALLAN MCLARTY
Respondent
REASONS FOR JUDGMENT
ROTHSTEIN J.A.
[1] This is a consolidated appeal and cross-appeal from three orders of the Tax Court.
[2] The three orders in question arose from one motion, pursuant to which the Minister of National Revenue sought to have a preliminary question of law resolved prior to trial. The first two orders granted the motion and the third order disposed of the preliminary question of law.
[3] The first order of the Tax Court was dated November 1, 2000. It was made under rule 58(1)(a) of the Tax Court of Canada Rules (General Procedure), S0R/90-688, which provides for the determination of a preliminary question of law prior to trial. The Minister made a motion that such a preliminary question be determined and the November 1, 2000 order granted the motion, although the preliminary question stated by the Motions Judge was not precisely the question proposed by the Minister. The question stated by the Motions Judge was:
Whether the promissory note provided as consideration by the Appellant is a contingent liability of the Appellant?
[4] The second order was dated December 27, 2000. The Minister sought to have the promissory note referred to in the preliminary question put before the judge deciding the question as the promissory note was incorporated by reference into the pleadings. The tax appellant sought to admit additional documentary evidence, including agreements, related to the promissory note, which the tax appellant submitted were incorporated by reference into the promissory note and, therefore, into the pleadings. The Motions Judge dismissed the request by both the Minister and the tax appellant. It is this order that gives rise to the appeal by the Minister which, in the consolidation order of April 10, 2001, was styled as a cross appeal.
[5] The third order was dated January 30, 2001. It determined the preliminary question of law in favour of the Minister. Apparently, as this determination disposed of the tax appeal in its entirety, the Motions Judge dismissed the tax appeal.
[6] Numerous arguments have been made by both the taxpayer appellant and the Minister but the appeal may be decided on one issue arising from the order of December 27, 2000.
[7] Before a motion under rule 58(1)(a) may be granted, the Motions Judge must be satisfied that there is no dispute as to any fact material to the question of law to be determined. See Berneche et al. v. Canada, [1991] 133 N.R. 232, at paragraph 6 (F.C.A.).
[8] At paragraph [5]2 of his amended reasons for the December 27, 2000 order, the Motions Judge found:
[5] Therefore the Court denies Respondent's counsels' motion to introduce the promissory note proposed because
[...]
(2) There are intervening documents relied upon or executed by the Appellant respecting this promissory note that may affect its interpretation or the liability of the Appellant in this case. They should also be before the Court with the promissory note if the promissory note is permitted. They constitute contested evidence and not pleadings or agreed facts. [Emphasis added in original.]
It appears that the Motions Judge intended to confine himself to deciding the preliminary question on the basis of the pleadings as contained in the taxpayer's Notice of Appeal alone, without any other documents or evidence.
[9] The Minister says that the Motions Judge erred in failing to permit the Minister from relying upon the promissory note as it was referred to in the pleadings and was incorporated by reference therein. The tax appellant says the Motions Judge erred in failing to permit him to refer to other documents which he says were incorporated by reference into the promissory note.
[10] If the preliminary question was to be decided on the basis of the pleadings, the pleadings included the documents incorporated by reference therein and they had to be taken into account. The Motions Judge erred in refusing the parties the opportunity of relying upon them. The authorities relied upon by the Minister support this conclusion. See Webb Offset Publications Ltd. v. Vickery (1999), 43 O.R. (3d) 802, at 803 (C.A.), Montreal Trust Co. of Canada v. Toronto-Dominion Bank (1992), 40 C.P.C. (3d) 389, at para. 4 (Ont. Ct., Gen. Div.), and Harris v. Canada, 2000 F.C.J. No. 729, at fn. 5 (C.A.), per Sexton J.A.
[11] Further, given that the promissory note should have been considered because it was expressly referred to in the pleadings, it follows that the documents, which the Motions Judge found may affect the interpretation of the promissory note, would also have to be considered.
[12] Finally, once the Motions Judge found that documents "may affect [...] the liability of the [tax] appellant [...]" and that they constituted "contested evidence and not [...] agreed facts", the Motions Judge was required to dismiss the motion for the preliminary question. It is only when there is no dispute as to material facts relevant to the question of law that the question of law may be determined on a preliminary basis. Once the Motions Judge determined that there were disputed facts that were material to the question, he had to dismiss the motion for determination of a preliminary question of law.
[13] The appeals of the orders of November 1, 2000 and January 30, 2001, should be allowed with costs here and in the Tax Court, and the orders quashed. The matter should proceed to trial in the Tax Court. The cross-appeal of the order of December 27, 2000, should be dismissed but without costs.
"Marshall Rothstein"
J.A.
"I agree
B.L. Strayer J.A."
"I agree
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-697-00
STYLE OF CAUSE: ALLAN MCLARTY v. THE QUEEN
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: April 17, 2002
REASONS FOR JUDGMENT : Rothstein J.A.
CONCURRED IN BY: Strayer, Nadon JJ.A.
DATED: May 21, 2002
APPEARANCES:
Carman McNary
Jehad Haymour
John Brussa FOR THE APPELLANT
Wendy Burnham
Deborah Horwitz FOR THE RESPONDENT
SOLICITORS OF RECORD:
Fraser Milner Casgrain LLP
Calgary, Alberta FOR THE APPELLANT
Morris Rosenberg, Attorney General of Canada
Ottawa, Ontario FOR THE RESPONDENT
Email this Content